Q2 2020 Financial Results Conference Call August 5, 2020 - - PowerPoint PPT Presentation

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Stratasys Q2 2020

Financial Results Conference Call

August 5, 2020

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Q2 2020

Conference call & webcast details

Speakers

• Yoav Zeif – CEO
• Lilach Payorski – CFO
• Yonah Lloyd – VP Investor Relations

Live webcast and replay: https://78449.themediaframe.com/dataconf/productusers/s sys/mediaframe/39720/indexl.html Live dial-in information US Toll-Free dial-in: 1-877-407-0619 International dial-in: +1-412-902-1012

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Forward-looking statements

The statements in this presentation regarding Stratasys' strategy, and the statements regarding its projected future financial performance, including the financial guidance (or withdrawal of guidance) concerning its expected results for 2020, are forward-looking statements reflecting management's current expectations and beliefs. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt change. Due to risks and uncertainties associated with Stratasys' business, actual results could differ materially from those projected or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: the degree of our success at introducing new or improved products and solutions that gain market share; the degree of growth of the 3D printing market generally; the duration of the global COVID-19 pandemic, which, if extensive, may continue to impact, in a material adverse manner, our

• perations, financial position and cash flows, and those of our customers and suppliers; the impact
• f potential shifts in the prices or margins of the products that we sell or services that we provide,

including due to a shift towards lower-margin products or services; the impact of competition and new technologies; potential further charges against earnings that we could be required to take due to impairment of additional goodwill or other intangible assets; the extent of our success at successfully consummating acquisitions or investments in new businesses, technologies, products or services; potential changes in our management and board of directors; global market, political and economic conditions, and in the countries in which we operate in particular (including risks related to the impact

• f coronavirus on our supply chain and business); costs and potential liability relating to litigation and

regulatory proceedings; risks related to infringement of our intellectual property rights by others or infringement of others' intellectual property rights by us; the extent of our success at maintaining our liquidity and financing our operations and capital needs; the impact of tax regulations on our results

• f operations and financial condition; and those additional factors referred to in Item 3.D “Key

Information - Risk Factors”, Item 4, “Information on the Company”, Item 5, “Operating and Financial Review and Prospects,” and all other parts of our Annual Report on Form 20-F for the year ended December 31, 2019 (the “2019 Annual Report”), which we filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2020. Readers are urged to carefully review and consider the various disclosures made throughout our 2019 Annual Report and the Report of Foreign Private Issuer on Form 6-K that attaches Stratasys’ unaudited, condensed consolidated financial statements and its review of its results of operations and financial condition, for the quarterly period ended June 30, 2020, which we are furnishing to the SEC on or about the date hereof, and our other reports filed with or furnished to the SEC, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Any guidance provided, and other forward-looking statements made in this presentation are made as of the date hereof, and Stratasys undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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Use of non-GAAP financial information

The non-GAAP data that appears below, which excludes certain items as described below, constitutes non-GAAP financial measures. Our management believes that these non-GAAP financial measures are useful information for investors and shareholders of our company in gauging our results of operations on an ongoing basis after (i) excluding mergers, acquisitions and divestments related expense or gains and reorganization-related charges or gains, and (ii) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets, and the corresponding tax effect of those items. These non-GAAP adjustments either do not reflect actual cash outlays that impact our liquidity and our financial condition or have a non-recurring impact on the statement of operations, as assessed by management. These non-GAAP financial measures are presented to permit investors to more fully understand how management assesses our performance for internal planning and forecasting purposes. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all items indicated above during a period, which may not provide a comparable view of our performance to other companies in our

• industry. Investors and other readers should consider non-GAAP measures only as

supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with GAAP. Reconciliation between results on a GAAP and non-GAAP basis is provided on slide 26.

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Yoav Zeif

CEO

Opening Remarks:

Corporate strategy review yields strong plan for industry leadership and long-term growth

Make it Better. Make it with Stratasys.

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COVID-19 weak macro and cost mitigation continues

• Global 4-day work week
• Additional 5% salary reduction for top

executives

• Accelerated 10% workforce reduction

as part of new operating model

• Work from home where possible and

subject to regulatory restrictions

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Helping our world through the pandemic and beyond

Make it Better. Make it with Stratasys.

• Responding to critical needs
• Demonstrating the possibilities and benefits
• f 3D printing

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3D Printing penetrating deeper into manufacturing

Manufacturers reassessing supply chains post-COVID-19 3D printing “top choice” for investment in SME survey

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New commitments to additive manufacturing from government, aerospace and automotive customers

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Successful J55 launch and initial shipments to customers

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Stratasys

Strong cash position Resilient business model Healthy balance sheet

+ =

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Our Goal:

1st Choice in the growing Polymer 3D Printing marketplace

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Growth focus:

Polymers for manufacturing

Polymers is the largest value pool in our industry and is growing steadily Manufacturing is the fastest- growing area within Polymers Long runway of opportunity with new technologies

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Polymer leadership via the most comprehensive solutions across applications and geographies

$5 billion global market in 2019 (not including parts sales)

Materials

Source: Stratasys market analysis drawing from CONTEXT AM3DP Printer Shipment and Forecast Report Q2 2020, Wohlers Report 2019, IDC, Others

Solutions

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Expand our technologies to serve the growing applications for Polymer 3D Printing

OTHER

OTHER

SSYS

Americas EMEA Asia-Pacific Hardware Materials Services Software FDM VAT PBF Others Design Engineering Healthcare Manufacturing Material Extrusion Material Jetting Powder Bed Fusion - Polymer VAT Photopolymerization– SLA (Polymer) Powder Bed Fusion - Metal VAT Photopolymerization – Non-SLA (Polymer) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2019 2015 PBF - Metal 2018 2017 2016 2020 2021 2022 2023 2024 Directed Energy Deposition Binder Jetting Vat Photopoly - SLA Vat Photopoly - Non-SLA PBF - Non Metal Material Jetting Material Extrusion

Source: Stratasys market analysis drawing from CONTEXT AM3DP Printer Shipment and Forecast Report Q2 2020, Wohlers Report 2019, IDC, Others

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$2.6B $2.4B

Total Addressable Market – 2019

Hardware / Materials / Software / Services

Prototyping

Stratasys serves approximately

• ne third of 3D Printing

hardware addressable market

Manufacturing

Production applications growing faster than prototyping FDM in aerospace shows what’s possible with the right technologies

PJ FDM

FDM

Source: Stratasys market analysis drawing from CONTEXT AM3DP Printer Shipment and Forecast Report Q2 2020, Wohlers Report 2019, IDC, Others

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Leverage Global Core Competencies Comprehensive solutions Go-to-market and service infrastructure Polymer industry knowledge

PJ FDM

$2.6B $2.4B

FDM

Prototyping

To win, invest in the growth engines driving the future additive manufacturing market

Manufacturing

$3.9B

$6.6B

FDM PBF VAT

OTHER

More than double current total addressable market

OTHER

PJ VAT FDM PBF OTHER

Total Addressable Market – 2025

Hardware / Materials / Software / Services Source: Stratasys market analysis drawing from CONTEXT AM3DP Printer Shipment and Forecast Report Q2 2020, Wohlers Report 2019, IDC, Others

Lilach Payorski

CFO

Financial Update

Make it Better. Make it with Stratasys.

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Staying operationally efficient during COVID-19 Strong balance sheet / No debt

Financial Results

Q2-19 Q2-20 Change Y/Y Q2-19 Q2-20 Change Y/Y Total Revenue 163.2 117.6

• 27.9%

163.2 117.6

• 27.9%

Gross Profit 81.2 43.7 (37.5) 85.6 53.3 (32.3) % Margin

49.7% 37.2%

• 12.5%

52.5% 45.4%

• 7.1%

Operating Income (Loss) 0.8 (29.3) (30.1) 9.1 (8.1) (17.2) % Margin

0.5%

• 24.9%
• 25.4%

5.5%

• 6.8%
• 12.3%

Net Income (Loss) attributed to SSYS Ltd. 1.2 (28.0) (29.2) 8.5 (7.4) (15.9) % Margin

0.7%

• 23.8%
• 24.5%

5.2%

• 6.3%
• 11.5%

Diluted EPS 0.02 (0.51) (0.53) 0.16 (0.13) (0.29) Diluted Shares 54.7 54.9 0.4% 54.7 54.9 0.4% GAAP Non-GAAP

$ in millions unless noted otherwise All numbers and percentages are rounded 19 Stratasys

Financial Results Revenue

$ in millions unless noted otherwise All numbers and percentages are rounded

Revenue Growth – Q2 ’20

Revenue Y/Y Product

• 33.0%

System

• 35.6%

Consumables

• 30.6%

Service

• 17.2%

Customer Support

• 7.5%

110.3 106.3 109.0 83.2 73.9 52.8 51.1 51.2 49.7 43.7

Q2 '19 Q3' 19 Q4' 19 Q1' 20 Q2' 20

Quarterly trend

Service Product

160.2 132.9 117.6 163.2 157.5

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Financial Results Gross margin trends

All percentages are rounded

GAAP

52.5% 52.4% 52.4% 48.4% 45.4%

61.1% 62.3% 61.6% 57.9% 52.9% 34.5% 31.7% 32.9% 32.4% 32.7% Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20

Non-GAAP

49.7% 49.2% 49.1% 45.0% 37.2%

57.3% 58.3% 57.0% 52.8% 45.9% 33.9% 30.1% 32.3% 32.1% 22.5% Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20

Total Gross Margin Product Gross Margin Service Gross Margin

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GAAP Operating Expenses

80.4 73.0 Q2 '19 Q2 '20

Non-GAAP Operating Expenses

76.6 61.4 Q2 '19 Q2 '20

Financial Results Operating expenses and operating margin trends

0.5%

• 3.8%
• 2.0%
• 15.0%
• 24.9%

5.5% 5.1% 6.3%

• 6.3%
• 6.8%

Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20

GAAP Operating Margin Non-GAAP Operating Margin

• 19.8%
• 9.2%

22 Stratasys $ in millions unless noted otherwise All numbers and percentages are rounded

Financial Results Balance sheet summary and cash flow from operations

(3.8) (9.7) Q2' 19 Q2' 20

Cash Flow From Operating Activities

Q2-19 Q1-20 Q2-20

Cash and Cash Equivalents and Short term deposits 366.3 325.5 313.0 Accounts Receivable 131.5 115.1 102.2 Inventories 147.8 172.5 164.6 Net Working Capital 505.9 480.7 465.7 23 Stratasys

$ in millions unless noted otherwise All numbers and percentages are rounded

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Stratasys has all the ingredients for leadership in Polymer additive manufacturing

Comprehensive Solutions

• Reboot growth in short-medium term
• Earn greater customer share of wallet
• Accelerate future topline growth

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Full Polymer solution suite from one source – Stratasys

Systems • Materials • Software • Service

Design Manufacturing Healthcare Engineering

GAAP to Non-GAAP Reconciliation Results of operations Stratasys Ltd

$ in millions unless noted otherwise

GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Gross Profit (1) $43,736 $9,612 $53,348 $81,167 $4,441 $85,608 Operating income (Loss) (1,2) (29,278) 21,228 (8,050) 805 8,246 9,051 Net income (Loss) attributable to Stratasys Ltd. (1,2,3) (27,986) 20,634 (7,352) 1,152 7,372 8,524 Net income (Loss) per diluted share attributable to Stratasys Ltd. (4) ($0.51) $0.38 ($0.13) $0.02 $0.14 $0.16 (1) Acquired intangible assets amortization expense 4,065 3,900 Non-cash stock-based compensation expense 497 541 Restructuring and other related costs 5,050 9,612 4,441 (2) Acquired intangible assets amortization expense 2,125 1,783 Non-cash stock-based compensation expense 5,614 5,552 Restructuring and other related costs 3,798 (3,530) Other expenses 79 11,616 3,805 21,228 8,246 (3) Corresponding tax effect (669) (874) Equity method related amortization, divestments and impairments 75 $20,634 $7,372 (4) Weighted average number of ordinary shares outstanding – Diluted Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 54,917 54,917 54,687 54,687

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